Sunday, August 25, 2013

Rupee jumps most in a year on FM pep talk

Place: Mumbai(7star news):-The rupee posted its biggest single-day gain of 1.98% in almost a year after finance minister P Chidambaram reiterated the government's commitment to meet the twin deficit targets for this fiscal.



In absolute terms, the appreciation of Rs 1.28 was the highest since May 2009.



The rupee had closed Thursday at 64.63, after which Chidambaram made a public statement. He reassured that the government was committed to meeting the fiscal and current account deficits for 2013-14. He also said that the rupee was currently undervalued.



Following this, the rupee opened Friday higher at 64.31 to the dollar and traded steady in the 64.40-64.75 range most of the day. The currency shut shop at 63.35 per dollar, close to the day's high level of 63.33 per dollar and up 3.37% compared with the all-time intraday low of 65.56 witnessed on Thursday. The last few minutes of the trading session witnessed most of the day's appreciation.



"The statement from the FM to a large extent provided a trigger for correction in the undervalued exchange rate," said Param Sarma, director and CEO at NSP Treasury.



Foreign exchange intervention by the Reserve Bank of India (RBI) helped prop up the rupee exchange rate.



A fall in the dollar globally also contributed. The dollar index, as measured against six major global currencies, was trading at 81.32 levels from 81.49 a day ago. Barring four, emerging market currencies including the Brazilian Real appreciated against the dollar on Friday.



The rupee was the second-best performer of the day in the emerging market currency basket even as there was net foreign fund outflow of Rs 149 crore from Indian equity markets.



On a weekly basis, the rupee lost 2.8% against the greenback in anticipation of some cues from the US Fed's July meeting. However, the minutes of the July Federal Open Market Committee meeting did not offer any indications on the timing or quantum of tapering plan.



Going forward, rating agency Crisil expects the rupee to recover from its current level and end fiscal 2013-14 at 60 per dollar on the back of narrowing current account deficit and inflow of foreign capital.



The ratings agency, however, raised concerns on foreign fund outflow that could be triggered by US Fed's pullback of quantitative easing.



"The rupee could start seeing some recovery around the same time if current account starts correcting and capital inflows begin to rise as a result of borrowings by public sector companies abroad and improvement in non-resident Indian deposits," said Crisil.
News From: http://www.7StarNews.com

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